risk of overvaluation

How Can Overvaluation be Identified?

Investors and analysts can identify overvaluation through various methods:
Price-to-Earnings (P/E) Ratio: A high P/E ratio may indicate that a stock is overvalued.
Discounted Cash Flow (DCF) Analysis: Comparing the market price with the DCF valuation can reveal discrepancies.
Comparative Analysis: Comparing the stock’s valuation metrics with those of its peers in the industry.
Technical Indicators: Tools like the Relative Strength Index (RSI) can indicate whether a stock is overbought.

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